Exculpatory Clauses

News & Analysis as of

FTC Wins Lawsuit Over Its Robocall Contest

In 2012, the FTC sponsored a contest in which it invited contestants to submit their best solutions to block robocalls. After reviewing almost 800 entries, the FTC announced two winners. As we posted previously, though, one...more

Provisions in Contest Rules are Held Enforceable

In 2012, the Federal Trade Commission (FTC) sponsored the “Robocall Challenge,” a contest whereby the agency invited contestants to develop a solution to the consumer problem of automated “robocalls.” One contestant, David...more

Delaware Supreme Court Rejects Presumption of Disloyalty for Independent Directors

Public companies incorporated in Delaware frequently adopt a charter provision, pursuant to 8 Del. C. § 102(b)(7), that insulates their directors from monetary damages for breaches of the fiduciary duty of care. Those...more

IRS Ruling Addresses LLC Eligibility for Cancellation of Debt Exception

In new CCA 201525010, the IRS addressed the issue of whether a general “exculpatory” debt of an LLC is recourse or non-recourse for purposes of classifying debt-relief as potential cancellation of debt (COD) income. Recourse...more

FCPA Compliance and Ethics Report-Episode 169-the First Mailbag Issue [Video]

In this inaugural Mailbag Episode, I field questions from an earlier podcast on the training of third parties under the FCPA. ...more

Before Rapunzel There Was Rudabeh

In Koehler v. NetSpend Holdings, Inc., 2013 Del. Ch. LEXIS 131 (Del. Ch. May 21, 2013), Vice Chancellor Sam Glasscock III wrote “In fact, NetSpend appears more Rapunzel than Penelope; she must, it seems, let down her hair or...more

'Cornerstone' Decision Reinforces Del. Corporate Law Bedrock Principles

Delaware law has long provided that the decisions of disinterested and independent directors who receive no special benefit from a transaction ought not be the basis of personal liability in monetary damages. To subject...more

Exculpatory Provisions Provide Powerful Protection for Independent Directors

The Delaware Supreme Court recently issued an important decision clarifying the standards that govern claims for money damages against independent directors of corporations whose charters contain exculpatory provisions....more

Delaware Supreme Court Holds That Plaintiffs Must Specifically Plead Non-Exculpated Claims Against Disinterested Directors in...

In In re Cornerstone Therapeutics Inc. Stockholder Litigation/Leal v. Meeks, the Delaware Supreme Court reversed decisions of the Delaware Chancery Court denying director-defendants’ motions to dismiss breach of fiduciary...more

Delaware Supreme Court Preserves Benefit of Exculpatory Provisions for Independent Directors at Motion to Dismiss Stage

A recent decision by the Delaware Supreme Court provides independent directors, such as special committee members, with the ability to escape protracted fiduciary duty litigation during its initial stages. The court’s...more

Delaware Supreme Court Holds That a Stockholder Plaintiff Must Plead a Non-Exculpated Claim to Avoid Section 102(b)(7)-Based...

In the consolidated appeal In re Cornerstone Therapeutics Inc., Stockholder Litigation and In re Zhongpin Stockholders Litigation, Nos. 564, 2014 and 706, 2014, 2015 Del. LEXIS 231 (Del. May 14, 2015), the Delaware Supreme...more

Important Delaware Supreme Court ruling on use of charter provision to seek preliminary dismissal – 3 key takeaways

In a decision jointly resolving two appeals - In re Cornerstone Therapeutics Inc. Stockholder Litigation and Leal v. Meeks - the Delaware Supreme Court clarified seemingly conflicting Delaware case law. The decision sought to...more

Supreme Court Clarifies When Independent Directors May Be Dismissed From Case

This important Supreme Court decision clarifies when independent, disinterested directors may be dismissed from litigation, even when an interested transaction is under attack. When the complaint only alleges a breach of the...more

Delaware Supreme Court Clarifies Pleading Standard For Claims Against Independent Directors

Yesterday, in In re Cornerstone Therapeutics, Inc. Stockholder Litigation, the Supreme Court of Delaware held that plaintiffs seeking monetary damages against disinterested, independent directors must plead facts sufficient...more

Delaware Supreme Court Confirms Exculpatory Clauses Have Teeth, and Can Be Used By Director Defendants At The Pleading Stage

In a decision with important implications for directors of public companies, the Delaware Supreme Court overturned two Chancery Court opinions and ruled that independent directors facing breach of duty of care claims arising...more

Delaware Supremes Give Independent Directors a Way Out

In an opinion Thursday, the Delaware Supreme Court held that independent directors should be dismissed from shareholder derivative litigation – even over transactions presumptively subject to “entire fairness” review – unless...more

M&A Update: Delaware Supreme Court Issues Important Ruling Protecting Independent Directors

On May 14, 2015, the Delaware Supreme Court ruled that claims against independent directors must be dismissed when a company charter provision shields directors from monetary liability for breach of the duty of care and the...more

Delaware Supreme Court Clarifies Application of Exculpatory Charter Provisions to Motions to Dismiss Independent Directors

On May 14, 2015, the Delaware Supreme Court issued its decision in In re Cornerstone Therapeutics Inc., S'holder Litig., clarifying that damages claims against independent directors can be dismissed where: (1) an applicable...more

Florida High Court Rules that Exculpatory Clauses Need Not Reference Negligence to Bar Negligence Claims

On February 12, 2015, the Florida Supreme Court affirmed the Fifth District Court of Appeal’s decision in Sanislo v. Give Kids the World, Inc., 98 So. 3d 759 (Fla. 5th DCA 2012) and held that an exculpatory clause was...more

Homebuilder Series Webinar: Protecting Your Company From Misrepresentation Claims Through Contractual Exculpatory Clauses [Video]

Watch an in-depth Bilzin Sumberg Homebuilder Series webinar that discusses protecting your company from misrepresentation claims through contractual exculpatory clauses. This seminar discusses the case of Duggan, LLC v....more

Florida Supreme Court Holds That Exculpatory Clauses Are Not Required To Include The Terms “Negligence” Or “Negligent Acts” In...

The Supreme Court of Florida in Sanislo v. Give Kids the World, Inc., --- So. 3d ----, 2015 WL 569119 (Fla. Feb. 12, 2015), distinguished indemnity agreements from exculpatory clauses and declined to apply the specificity...more

Weavering: Appeal court judgment clears directors of wilful default

On 12 February 2015 the Cayman Islands Court of Appeal handed down its long-awaited judgment in Weavering Macro Fixed Income Fund Ltd v Peterson and Ekstrom. The case, which measured the liability of directors, sent...more

Nevada Exculpation Statute Leads To Dismissal Of Claims Against Erstwhile Officer

Nevada, unlike either California or Delaware, exculpates corporate officers from liability to the corporation for any damages as a result of “any act or failure to act” in his or her capacity as an officer unless it is proven...more

Chen v. Howard-Anderson: A Study in the Standards of Review and of D&O Conduct in the Merger Context

Litigation over challenges to corporate mergers has swelled in recent years, exposing directors, officers and their D&O insurers to large amounts of defense costs and potentially great liability. The Delaware Chancery Court...more

Florida High Court To Examine Exculpatory Clauses That Do Not Specifically Reference Negligence

On November 5, 2013, the Florida Supreme Court heard oral argument in a case examining whether a release clearly and unambiguously releases the defendant from liability for a plaintiff’s physical injuries when the release...more

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